NZ ETS Auction Reflects Progress in Restoring Market Credibility

Minister Watts highlighted that 4 million units were sold at the auction, a result that underscores the growing alignment between the government’s climate policies and market performance.

The New Zealand Emissions Trading Scheme (NZ ETS) auction held today resulted in a partial clearance, indicating progress toward restoring market confidence, Climate Change Minister Simon Watts announced.

Minister Watts highlighted that 4 million units were sold at the auction, a result that underscores the growing alignment between the government’s climate policies and market performance.

“This result shows the market is heading in the right direction to rebuild credibility in the NZ ETS,” said Mr. Watts. “A credible ETS is crucial as it incentivizes individuals and businesses to reduce emissions, ensuring we meet our climate targets effectively.”

Recent Changes to Strengthen the ETS

The Government announced significant changes in August 2024, reducing the number of units available at auction between 2025 and 2029 from 45 million to 21 million. While these adjustments will take effect next year, the move has already sent a clear signal of the Government’s commitment to strengthening the ETS.

Key actions include:

Reducing oversupply in the ETS to ensure the scheme accurately reflects carbon prices and incentivizes emission reductions.

Aligning auction volumes with New Zealand’s emissions reduction targets, as outlined in the Paris Agreement.

Introducing safeguards to prevent market distortions and maintain investor confidence.

“These steps are part of our broader strategy to ensure the ETS remains New Zealand’s most effective tool for tackling emissions,” Watts explained.

Economic and Environmental Impact

The restoration of credibility in the ETS has far-reaching implications:

Economic Growth: A robust ETS promotes investment in low-emission technologies and supports the transition to a high-value, sustainable economy.

Climate Goals: By providing clearer price signals, the ETS can drive greater accountability and ambition in reducing emissions across industries.

Investor Confidence: A predictable and credible ETS attracts international and domestic investors looking to fund green initiatives.

Next Steps

The next NZ ETS auction is scheduled for March 19, 2025. The Government will continue working to refine the scheme to ensure it achieves its purpose.

“The work we’ve done so far has laid a strong foundation, but we must remain vigilant to maintain momentum,” said Mr. Watts. “Restoring credibility in the ETS is a crucial step towards meeting our emissions reduction commitments and building a sustainable future for all New Zealanders.”

Stakeholders, including environmental organizations and business leaders, have expressed cautious optimism about the changes, emphasizing the importance of continued transparency and robust policy enforcement.